DYI’s

An Asset Discussion!

U.S. Stocks: 

Making the statement that equities being overvalued is a massive understatement.  Valuations today are the highest they’ve ever been in history!  The chart below let’s one know the downside risk today is significantly greater than any remaining upside.

Investment Grade Long Term Bonds: 

Yields today despite all of the ongoing hoopla are now trading at their average since 1871!  Now that the U.S. has ended their sub atomically low yields investors have a reasonable chance to increase their wealth through compounding.  This is especially true for those with a minimum of 10 years (20 years is better) before the money is needed to dollar cost average into your favorite long term investment grade bond fund.

However for those with lump sums there is still room for higher interest rates even within this current economic cycle.  Since the last vestige for the gold standard ended in 1971 (100% fiat currency) interest rate movements – up or down – are now far more exaggerated.  Simply put there is not enough level of screaming (such as 1979 to 1981) for a secular peak in rates.  So…The name of the game is dollar cost averaging.

Gold:

The Dow to Gold Ratio is currently trading at 12.63 to 1.  The long term average is around 10 to 1.  In relation to gold stocks remain overvalued (no kidding!) with additional upside remaining for gold.  

Unless there is a sea change of biblical size within Congress and President(s) getting their respective acts together for balanced budgets gold will continue move in a saw tooth motion upward.  IMO I would not be surprised at the peak for gold and the low for stocks to end at a 1 to 1 ratio.

Till Next Time